Amazon Sets Up (Really Big) Shop to Get You Your Stuff Faster

The view inside an 800,000-square-foot Amazon.com distribution center in Goodyear, Arizona. A million-square-foot Amazon warehouse an hour east of San Francisco would give Amazon a massive footprint in Silicon Valley's backyard.

Photo: Ross D. Franklin/AP

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Amazon Sets Up (Really Big) Shop to Get You Your Stuff Faster

The view inside an 800,000-square-foot Amazon.com distribution center in Goodyear, Arizona. A million-square-foot Amazon warehouse an hour east of San Francisco would give Amazon a massive footprint in Silicon Valley's backyard.

Photo: Ross D. Franklin/AP

Across the country, Amazon is erecting massive distribution centers in the nation's exurbs to shorten the distance between online shoppers and the stuff they want. This week, the company announced it's planting a Sasquatch-sized footprint right in Silicon Valley's backyard.

Amazon's newest million-square-foot warehouse is slated to go up an hour east of San Francisco in Tracy, California. This conservative farm town of 84,000 may be a world away culturally from its Bay Area neighbors. But it's close enough physically to make shipping Amazon orders a snap.

Amazon long kept its distribution centers out of California to avoid having to collect state sales tax. The de facto tax holiday gave Amazon a huge price advantage over brick-and-mortar competitors in the state, especially for high ticket items like electronics.

But California lawmakers began putting pressure on Amazon as state budget deficits ballooned. After Gov. Jerry Brown signed a bill that would have forced Amazon to start collecting the tax immediately, he and the company reached an agreement in the fall of 2011: California would postpone its sales tax requirement in exchange for promises from Amazon to build big warehouses in the state.

Amazon started collecting sales tax in California in September, and so far hasn't seen an obvious exodus. Shoppers are even less likely to flee as Amazon sets up shop near their cities, or any big city.

Amazon's strategy hinges on getting its inventory as close as possible to as many people as possible. The closer Amazon can get its stuff to the people who want it, the faster and cheaper the company can get it to them. While the initial investment in so much real estate may drag down the bottom line, Amazon's buoyant stock price shows investors have faith that as Amazon's hubs of consumer desire spread across the land, profits will follow.

In California, the economic struggles of inland counties has also aided Amazon's building spree while also letting the company portray itself as a benefactor. Tracy is the second-largest city in San Joaquin County, one of the worst-hit counties in the nation during the foreclosure crisis. Amazon's first distribution center in the state went up in San Bernardino, which filed for bankruptcy last year. Amazon gets cheap land and cheap labor; hard-hit communities get hundreds of jobs; and in Northern California at least, everyone who orders from Amazon seems likely to have their online consumer cravings satisfied faster than ever.